The European pasta manufacturers should lower their prices. This is what consumer groups and politicians from Italy and France are demanding. In Italy, consumer advocates have even called for a pasta strike, while the French government is threatening producers with sanctions if prices don’t go down.
The rise in pasta prices is well outpacing overall inflation in many countries and has continued despite a sharp fall in wheat costs. Manufacturers, which include Barilla, De Cecco and La Molisana in Italy and Panzani in France, for example, claim that they offer their pasta at fair prices. Recent price increases would reflect higher input costs following Russia’s invasion of Ukraine.
Yet they are accused of greed and “greed inflation”. “The reality is very different from what the manufacturers say,” writes the Italian consumer group Codacons. “Monthly year-on-year price increases are twice the current rate of inflation.”
Although general inflation has eased in recent months, the price of a kilogram of pasta in Italy rose 14 percent in May from a year earlier. It was 15.7 percent in April and 17.5 percent in March, according to official statistics. According to the International Pasta Organization, Italians are the largest consumers of pasta in the world, consuming about 23 kg per person per year. “So for Italian families, it’s quite an existential crisis,” said Clive Black, an analyst at Shore Capital.
The picture is similar in other European countries. In Great Britain, the price increase for pasta in April was 27.6 percent, in Germany 21.8 percent and in France 21.4 percent.
The pasta consumed in Europe is mainly made from Canadian durum wheat, which is mainly imported to Italy, the world’s largest producer. The extreme heat and drought in Canada in 2021 caused wheat yields to fall sharply, causing the price to skyrocket. Since December, however, the price of wheat has been on a sustained downward slide, only picking up again slightly after the Ukrainian Kakhovka Dam was blown up in June. While Canadian durum wheat is down more than 40 percent from its peak, it is still 18.8 percent higher than in June 2021, before the price hike.
Pasta makers, accused of using inflation as an excuse to raise prices, point out that wheat is just one of many fluctuating costs in their product’s journey from farm to fork.
Luigi Cristiano Laurenza, secretary-general of Unione Italian Food Pasta industry association, explained that the industry is still struggling with higher energy, logistics and packaging costs following Russia’s invasion of Ukraine and that it will take time for these to come down Wheat prices would affect buyers.
“The impact of production costs on products is never immediately noticeable,” he said. “If the current trend of cost reductions continues for a longer period of time, we could even see a fall in consumer prices.”
One factor in the delay is the time it takes to use up wheat purchased at higher prices, with current prices reflecting those contracts.
“Prices are still high because companies are still using up the wheat stocks they bought at rock-bottom prices,” said Giuseppe Ferro, chief executive of La Molisana, Italy’s fourth-largest pasta maker. “Once that’s over in three or four months, prices will go down.”
Food economist David Ortega, associate professor at Michigan State University, said food prices have tended to remain stable given the multitude of costs beyond basic ingredients. “They go up very quickly when there’s a shock and then they take longer to go down,” he said. “We see that the prices of commodities like wheat are falling relatively sharply. But wages continue to rise and the prices of some raw materials for packaging and others are still high.”
The discrepancy between the cost of wheat and the price on the label is at the heart of a dispute raging between food companies, retailers and politicians.
As food prices have overtaken energy prices as the main driver of inflation across Europe, manufacturers are under particular pressure to lower prices. Corporations like Nestlé, Unilever, and Pepsico reported good quarterly results, in part because they were able to pass higher costs on to consumers.
Italy’s Industry Minister Adolfo Urso called an emergency meeting of pasta makers, retailers and associations last month after consumers called for a price cap over unexpected price increases. However, officials chose not to intervene, assuring the public that the market will soon correct itself due to falling energy and commodity costs.
Codacons meanwhile contacted the Italian competition authorities and asked them to investigate whether the pasta manufacturers might have colluded to manipulate prices. Meanwhile, Assoutenti, another consumer group, has called for a week-long “pasta strike” to begin next week. Consumers are encouraged to stop buying pasta and start making it at home.
France’s Finance Minister Bruno Le Maire last month threatened fiscal measures to reclaim profits if the industry refused to resume price negotiations with retailers.
Speaking to a French radio station, the president of French supermarket operator Leclerc, Michel-Edouard Leclerc, said the pasta price increases were inexplicable. He accused the food manufacturers of a lack of transparency: They would hide behind the war in Ukraine.
Le Maire said this month that 75 food manufacturers have pledged to reduce prices through July to reflect falling wholesale costs.
In the UK, plans by the government to voluntarily cap the prices of staple foods in supermarkets have drawn backlash from retailers and even Conservative MPs. The government has dismissed calls for an inquiry into supermarkets’ “profiteering” but the UK competition authority said it would take a closer look at supermarket pricing of groceries.
The UK’s Food and Drink Federation said its members would cut costs as much as possible and consider price increases “only as a last resort”. De Cecco, Barilla and Panzani, which make their pasta from wheat grown in France and have pledged to reduce their prices as of July 1, declined to comment.
Apart from the recent deal in France, there are early signs of a slowdown in some areas of the market, such as the cheaper own-brand pasta from the big supermarkets. But overall there is little evidence that manufacturers will lower prices.
Ortega believes that grocer pressure on manufacturers will likely continue. “But I don’t think it will lead to big action,” he said. “The price increases are due to an increase in costs along the entire supply chain.
©2023 The Financial Times Ltd.
This article first appeared on Capital.de
